Ponzi scheme suspects invoke 5th Amendment in John Bravata case

DETROIT — John Bravata promised investors that their money would be safe and return profits of 8 to 12 percent a year, the U.S. Securities and Exchange Commission alleges.

John BravataBut under questioning Wednesday, the chairman of Bravata Financial Group and BBC Equities refused to answer questions about what he said to investors, invoking his rights under the Fifth Amendment of the U.S. Constitution.

Bravata, his son Antonio Bravata, and John Bravata’s wife, Shari Bravata, were each called to answer questions from SEC lawyers during a hearing Wednesday in U.S. District Court in Detroit. The Bravatas, along with John Bravata’s business partner Richard Trabulsy and their companies, were sued by the SEC for their roles in an alleged $51 million Ponzi scheme.

The government says John Bravata, who grew up in the Kalamazoo area, told 455 Michigan and Ohio investors that he was investing their money in real estate investment fund BBC Equities.

But, according to SEC allegations, only about $20 million went to purchase real estate. The remainder of investor funds were used to pay dividends to investors, fund company operations and pay for the defendants’ cars, homes, vacations and luxury items such as jewelry, the government says.

Part of the SEC’s questioning of John Bravata focused Wednesday on the financial state of BBC Equities before the SEC filed its lawsuit in late July.

John Bravata has blamed the SEC and state of Michigan for hurting his investors by cutting off his supply of money and shutting down his companies, which he said would have been able to return investors’ funds.

But the SEC introduced evidence that it said showed that BBC Equities was financially strapped before the July lawsuit and before the state of Michigan issued a cease and desist order preventing the sale of BBC Equities investments at the end of March. That evidence included:

In the fall of 2008, SEC lawyers said, BBC Equities told Huntington Bank, which secured loans on a number of BBC-owned properties, that it may not have sufficient cash flow to make all its loan payments.

Between January and June this year, BBC Equities produced about $550,000 in revenue but spent more than $5.9 million.

John Bravata retained a bankruptcy attorney before the SEC filed its lawsuit.

John Bravata said BBC Equities was “hurting” but that he was taking steps to prevent financial collapse.

“We were hurting because we stopped getting $2 million a month when the state issued the cease and desist order,” he said.

Antonio Bravata, an insurance agent for Bravata Financial Group, also invoked his Fifth Amendment rights when asked about his alleged role in the sale of BBC Equities investments. He admitted to being compensated by BBC Equities but declined to answer whether he received commissions or finders fees for selling investments in BBC Equities.

Shari Bravata, whom the SEC alleges only benefited from the alleged fraud, answered questions about gifts that John Bravata bought her, such as a Maserati sports car and diamond-encrusted Rolex watch.

The court hearing, in which the SEC is seeking a preliminary injunction against the defendants, was scheduled to resume this morning. The preliminary injunction would keep in place a freeze of the defendants’ assets and a court-appointed receiver to oversee the companies for the remainder of the civil case.